Gender Diversity in the Boardroom: Raising Questions About the "Comply or Explain" Model and Targets in Canada

Abstract

Effective corporate governance requires diversity in perspectives. Nevertheless, gender disparity continues to be a long-standing and prevalent problem on Canadian boards of directors and in executive roles. A “business case” argument that asserts that diverse leadership achieves better financial results has been put forward in support of rectifying gender disparity; however, recent meta-analyses research denies the validity of the “business case” argument. This paper argues that conclusions regarding the invalidity of the business case should be approached with caution. In 2014, securities regulators in Canada implemented amendments to Form 58-101F1 Corporate Governance Disclosure in order to address gender diversity. Unfortunately, progress has been slow because the new diversity disclosure rules are not based on a true “comply or explain” model. This paper argues that securities regulators should require publicly traded companies to adopt a policy relating to the representation of women on their boards. Furthermore, this policy should include a target percentage, chosen by the company, for women on a company’s board of directors and in their executive officer positions.

Increasing the Number of Women on Corporate Boards: Comparing The “Comply or Explain” and Quota Approaches, Which Is the Most Practical and Effective for Canada?

“…While recalling the attribution and causality issues discussed in Chapter One, analysis in this chapter suggests that the "comply or explain" approach seems to be at least a factor that is driving Canadian corporations to have more gender diverse boardrooms. But the progress has been considered by some to be slow (Calleja et al, 2019;Catalyst, 2016;Halabi, 2019), and is discussed, there are aspects that could be improved. If these improvements were made, the suggestion is made here that approach could be more effective at achieving gender diversity, and perhaps in a more rapid manner.…”

“…In 2014, amendments were made to the Form 58-101F1 Corporate Governance Disclosure of National Instrument 58-101 Disclosure of Corporate Governance Practices (the disclosure requirements) (CSA, 2019). These disclosure requirements/rules were enclosed in the "comply or explain" approach implemented by the OSC (Halabi, 2019). This policy was first adopted in Ontario, then six other jurisdictions followed; Alberta, Manitoba, New Brunswick, Nova Scotia, and Saskatchewan (CSA, 2019).…”

“…Giving the reasoning that candidates are selected based on merit, can signal the belief that there are simply not enough female candidates. Studies have found that men tend to believe that gender parity is an issue because there are not enough qualified women (Halabi, 2019). However, often times candidates are selected based on the networks of those already sitting on the board and their networks often do not include many women (Halabi, 2019).…”

“…Studies have found that men tend to believe that gender parity is an issue because there are not enough qualified women (Halabi, 2019). However, often times candidates are selected based on the networks of those already sitting on the board and their networks often do not include many women (Halabi, 2019). This can also lead to issues related to gender bias.…”

“…It is not possible to attribute causality between the introduction of the law in 2015 (the law came into effect in December 2014) and the above-mentioned gradual but noteworthy increases in women on Canadian corporate boards up to 2019. Some in Canada are now suggesting that there has not been enough progress with the comply or explain approach (Calleja et al, 2019;Catalyst, 2016;Halabi, 2019), and that a mandatory gender quota approach should be implemented (Willey, 2017).…”